Journal Article Review
ANDYXU666
IB-Week2-Globalisation-Canvas.pdf
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Globalisation and IB
Dr Joseph H. Kim School of Management
RMIT University
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Today’s lecture
• Concept and history of globalisation
• Whither globalisation? Dawning of a new era?
• Implications for MNEs
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What is globalisation?
• “Globalisation…is a process leading to greater interdependence and mutual awareness among economic, political and social units in the world, and among actors in general” (Mauro Guillén)
• “Globalisation… is the closer integration of the countries and peoples of the world … brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders” (Joseph Stiglitz)
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Globalisation: “The World is flat”
• Acceleration of globalisation after the end of the Cold War
• Towards a more integrated and interdependent world economy
Globalisation is moving so much “farther, faster, cheaper, and deeper”
(T. Friedman)
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DHL & NYU Global Connectedness Index 2020
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Drivers of globalisation
• Trade liberalisation - reductions in trade barriers (reduction of tariffs and quotas) - pro-market reforms
1913 1950 1990 2011
France 21 18 5.9 3.9
Germany 20 26 5.9 3.9
Italy 18 25 5.9 3.9
Japan 30 - 5.3 2.6
US 44 14 4.8 3.3
Average tariff rates on non-agricultural products as a percentage of value
Source: The Economist. 24 June, June 1995 pp. 3-4, WTO, World Tariff Profiles, 2012
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Drivers of globalisation
• Technological advancement
• Emergence of multilateral institutions such as WTO and World Bank
• Growing influence of MNEs
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Globalisation of markets and production
• Globalisation of markets: merging of historically distinct and separate national markets into one global market place
“Consumers in every country would increasingly have an appetite for and access to products and services from all over
the world.” (T. Levitt)
• Globalisation of production: sourcing goods and services from locations around the globe to take advantage of national differences in the cost and quality of various factors of production
“In a flat world, there is no such thing as an American job…It's just a job, and it will go to the fastest and most productive
worker.” (T. Friedman)
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Apple’s global supply chain
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Apple’s global supply chain
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COVID-19 and rising nationalism: Are we in the era of anti-globalisation?
• Growing protectionism and nationalism - Growing support for political parties
and candidates with nationalist or protectionist agendas
- Increase in protective measures by national governments
- e.g restrictive investment policy, travel & trade ban
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WTO “Global trade could fall by as much as a third”
Source: World Trade Organization
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Dawning of a new era? Weakening force of globalisation
• Weakening of multilateral institutions & declining trust in business and political elites
- Breakdown of multilateral negotiations, regional trade blocs (WTO Doha Round, BREXIT, US pulling out from TPP, weakening sway of multilateral institutions etc) - Pressure for alternative economic modes
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Implications for MNEs: Navigating the new world of globalisation
Contact details
• Fragmented and multipolar global economy - Shift in power: rise of emerging economies (e.g. BRIC economies which comprise about 40% of world population) - EMNEs playing an increasingly important role for the global economy in terms of production, consumption and innovation - Rise of strategically alternative countries in the post-COVID19 global economy?
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Rise of EMNEs: in Fortune Global 500
Country 2000 2020
BRIC 16 142
China 10 124
US 179 121
Japan 107 53
France 31 31
UK 38 22
Source: Fortune Global 500
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Implications for MNEs: Navigating the new world of globalisation
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• Risk management has become vital for MNEs - MNEs must adapt to sudden regulatory shifts, political risks, changing economic conditions, and other risks - Growing calls for “sovereign” or “national” supply chains: Should MNEs focus their attention more at national/regional levels than the global level? (Flores et al., 2013; Fratianni & Oh, 2009)
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Contact details
• Greater emphasis on social and environmental responsibilities of MNEs
- Growing power of MNEs vis-à-vis government, labour and consumers - MNEs account for 1/4 of worldwide employment, 1/3 of global
output and more than 1/2 of global trade - Can MNEs fill in the gaps in global governance in areas such as
climate change, poverty relief and trade liberalisation?
Implications for MNEs: Navigating the new world of globalisation
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